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Collection House shares just hit a 52-week low

Collection House Limited (ASX: CLH) shares are now down 34% over 2019 as the debt collector hits the skids on the back of a couple of disappointing updates.

On November 24 the group surprised the market by announcing the resignation of its CEO Anthony Rivas. 

I spoke to Mr Rivas a couple of times and he was an ebullient character, but the abrupt departure suggests he did not see eye to eye with a board that immediately promoted CFO Doug McApline to the role.

Mr McAlpine has only been with Collection House since July 2019, while Mr Rivas was in the role just over three years.

Generally, a high turnover of ‘C-suite’ staff or staff generally at any company is a sign that there may be problems at the underlying business. High staff turnover also makes it harder for a business to perform well, as, inter alia, it reduces productivity and adds to costs.

Over FY 2109 Collection House paid dividends of 8.2 cents per share on adjusted earnings of 15.2 cents per share. It’s guiding for adjusted earnings between 17 to 18 cents per share over FY 2020. 

That means it sells for just 6x forecast earnings at $1.06 this afternoon. It’s also likely to offer a pretty big yield based on forecast earnings.

It’s worth nothing though that debt collection businesses traditionally trade on low multiples due to the limited visibility of earnings that are vulnerable to volatile debt pricing environments. 

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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